New round of environmental compliance inspection of Chinese chemical industry starts; be alert to impact to plan global sourcing

Posted on2018-05-14

Since China initiated strict environmental compliance inspections, several industry players, including pesticide and intermediates production enterprises, are facing a live-or-die choice.

Currently, many provinces in China have initiated the process to close or revoke chemical industrial parks. According to incomplete statistics, the number of chemical industrial parks is expected to go down to some 480 by the end of 2018.

Recently, a report from AgroPages revealed that the start of a provincial environmental compliance inspection in Jiangsu Province, in production activities within the chemical industrial park of Guannan County was ordered to shut down. To help our readers understand better the environmental actions being taken in China, so as to prepare for procurement, AgroPages has listed the environmental actions being taken in several major chemical production provinces of China.

Jiangsu: Listed enterprises shut down for correction action

Jiangsu has started a province-wide environmental compliance inspection, conducted by three inspection teams that have been sent to target locations. In Jiangsu Guannan County, enterprises within the chemical industrial park were asked to shut down to make corrections.

Following the shutdown of production within the chemical industrial park, listed chemical enterprises have one after another announced temporary shutdowns. The two subsidiaries of Lianhetec have been affected by the shutdown; several companies even suspended their trading of shares.

Guangdong: Correction plan to be completed by end of June 2018; relocation to be initiated by year-end

Recently, Guangdong has scheduled to complete its correction plan by the end of June 2018, and is endeavoring to complete the decentralized and disorderly production distribution of chemical works by the end of September 2018.

Hazardous chemical production enterprises, small and medium enterprises and large enterprises, that pose hidden risks to work safety and environment have been requested to start relocation by the end of 2018 via in-situ resettlement by moving into a compliant chemical park or shut down to exit production.

Hubei: Non-compliant enterprises will be shut down, demolished

Hubei is continuing its province-wide environmental compliance inspection and is determined to shut down and demolish non-compliant enterprises.

The first batch of provincial-level environmental compliance inspection for 2018 has been started. Until now, some four provincial inspection teams were mobilized to target locations.

In the meantime, inspections of chemical industrial parks in other provinces are also being conducted, including the provinces of Zhejiang, Gansu, Hebei, Sichuan, Anhui and Henan.

Future trend as it develops

Environmental compliance inspection has directly impacted the chemical industry. In the past, enterprises have increased prices to a certain degree, which are, however, not comparable to the rise in prices of raw material and labor costs. The cost pressure built up over a long time was not transferred to customers but was borne by the enterprises themselves. With stringent environmental requirements, the production efficiency of enterprises have reduced. Based on the current cost of production, it is expected that the prices of chemical raw materials may increase by 20% to 50% from May 2018.

In the coming five years ahead, with more stringent environmental regulations expected, both Chinese and foreign-invested chemical enterprises will face the difficult task of facility refurbishment or business transformation.